Profit taking slows advance after emerging market spreads hit record low; Suhyup Bank to sell 5-year notes

By Reshmi Basu

New York, April 9 - Emerging market debt saw some consolidation Monday after touching its tightest spread levels ever amid an illiquid session as investors digested last Friday's surprisingly strong non-farm payroll numbers in the United States.

In the primary market, Suhyup Bank plans to sell an offering of dollar-denominated five-year notes (A3/A-).

The $300 million issue of senior unsecured notes will be a drawdown under the bank's $1 billion euro medium-term note program, according to the ratings announcement released by Moody's Investors Services.

Deutsche Bank and Standard Chartered Bank have been mandated to lead the transaction.

Suhyup Bank is part of the National Federation of Fisheries Cooperatives of Korea.

EM bows to profit-taking

Back to the secondary market, emerging market debt saw some profit-taking Monday while trading volumes remained light as London markets were closed in observance of the Easter holiday.

Overall, the sector witnessed spread tightening on follow-through from Friday's release of non-farm payroll numbers for March, which came in much stronger than expected.

On Friday, the Labor Department reported that 180,000 new jobs were added to the economy, far surpassing market consensus of 120,000 new jobs,

The data reinforced the outlook that the U.S. economy is stronger than originally believed. And that helped raise investors' appetite for risk.

During the Asian trading hours Monday, markets were off to a slow start, given the close in London. Nonetheless Friday's positive job numbers lent support to regional equity markets, which helped spreads tighten for sovereign and corporate names, according to a market source.

That firm tone carried over into the New York session as spreads hit another historical low.

"The market is riding on [U.S.] data at this point," noted a market source.

"The news came in above expectations, so spreads are tightening," he added.

But eventually the market succumbed to profit-taking. At the end of the session, the JP Morgan EMBI Global index was down by 0.17% while spreads tightened by 7 basis points to 161 basis points versus U.S. Treasuries, posting another record low.

Among benchmark names, the bellwether Brazilian bond due 2040 gave up 0.30 to 134.85 bid for a yield of 5.69%.

Russia, Venezuela slip with oil

Meanwhile oil producers Russia and Venezuela underperformed broader benchmarks on the back of sliding oil prices, which tumbled 4%.

In trading, the Russian bond due 2030 was unchanged at 113.44 bid for a yield of 5.66%.

Venezuela was also pressured from last week's $7.5 billion issue from Venezuelan state oil company PDVSA. The new bonds - like the nation's existing debt - have come under pressure from the new supply with spreads over the sovereign widening by some 6 to 8 basis points, noted an analyst.

During the session, the Venezuelan bond due 2027 eased 0.90 to 124.25 bid for a 7% yield.

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